Investment Valuation in India

Unemployment Insurance or Employment Insurance as it is called in some countries provides temporary financial assistance for unemployed citizens while they look for work. In times of distress such as the global financial crisis when people get laid off, this is an effective way to protect people financially, well to an extent at least. At the same time this does not promote or encourage unemployment among people. HOW IT WORKS? This insurance is not applicable for people who have not started working yet. This only applies if you were working as an employee. Eligibility Generally you need to be ‘qualified’ to be insured. Qualification includes Insurable hours - Continuous period of work for a certain minimum hours (eg. 52 weeks) Unemployment – you need to be without work and without pay for some minimum days (eg 7 days) No fault – you should have been fired for no fault of yours and should not have left the job without any ‘valid’ reason. Insurance Premium: A portion of salary (e.g. 2%)

Vulture Funds are financial organizations/private equity firms that seek to invest in debt issued by a company (or in case of a sovereign debt, a country) that is weak and dying. They are also called “Distressed Debt funds”. They buy up sovereign debts of poor nations that are assumed default or near bankrupt when at time the debt is just about to be written off and eventually sue the debtor for the full value of the debt plus interest in the future. The full value is usually 10 times the original paid up debt. Alternatively, they hold on to these investments (if the issuer doesn’t default) and sells them when the prices skyrocket. So these vultures prey upon the debt cancellation measures received by the poor companies/nations by purchasing their debt at a discount (sometimes as low as 20%) and redeeming it at a premium (including interest). They provide a useful alternative for investors who are unable to follow up upon their defaulted debt and in turn are certain to face financial r

The celebrations of free ATM transactions from any bank in India was not even over that the RBI accepted the Indian Banks Association (IBA) proposal to re-introduce transaction charges for customers on the use of other banks’ ATM. IBA has proposed to levy a transaction fee of Rs. 20 per transaction for using another bank's ATM more than five times a month. Also the Reserve Bank of India has said that not more than Rs 10,000 can be withdrawn each time they are used. It will be optional on the part of the banks to levy this charge on customers. IBA has not made it mandatory but left it to the banks' discretion. Since the banks will recover the transaction costs it would have to pay to the bank providing the ATM services, it has less to lose. Once again, it’s the customers who lose. ATMs have become an important channel for banking transactions, particularly for cash withdrawal and account balance enquiry and also funds transfer, bill payments and cell phone recharge facilities. T

A SAS 70 report is the service auditor’s report on a service organization’s controls for use by user organizations and their auditors. Statement on Auditing Standards (SAS) No. 70, Service Organizations, is a widely recognized auditing standard developed by the American Institute of Certified Public Accountants (AICPA). The requirements of Section 404 of the Sarbanes-Oxley Act of 2002 make SAS 70 audit reports even more important to the process of reporting on the effectiveness of internal control over financial reporting It applies to any service organization that: • Executes transactions and maintains accountability or • Records transactions and processes related data The primary purpose of the SAS 70 report is to provide information about the service organization to auditors who audit the user organization’s financial statements. Benefits of a SAS 70 Report Reduces disruption to service organization operations (single auditor concept) - Otherwise, auditors of all user organizat

New Pension Scheme FAQs What is the New Pension Scheme (NPS)? New Pension scheme is a retirement planning instrument and a system of fund management like the Employees Provided Fund (EPF), Public Provided Fund (PPF). It is based on defined contributions It is voluntary for private sector employees but mandatory for new recruits to the Central Government Service (Except armed forces). Who is it for? It is applicable for salaried employee (both public sector and private sector) within the age group of 18 to 55. you need to compulsorily withdraw from the system on or before the attainment the age of 70. Who is the regulator for this scheme? The Pension Fund Regulatory and Development Authority(PFRDA) has been assigned the work of protecting the interest of the people participating in the NPS. It’s a Government regulatory body of India What is PRAN? Permanent Retirement Account Number (PRAN) is like an account number which will help you check your funds online or at the point of presence (

The Limited Liability Partnership (LLP) Bill 2008 was passed by the Parliament on December 12, 2008 and legislated vide notification of the Act in the Gazette of India on January 7, 2009. Subsequently ‘The Limited Liability Partnership Rules, 2009’ were notified by the Central Government on April 01, 2009. Key features of the LLP Act are as below: – An LLP Is a separate legal entity under the Limited Liability Partnership Act, 2008 and can sue and be sued. – An LLP has a perpetual succession and partners may come and go - The LLP Agreement is a charter of the LLP which denotes its scope of operation and rights and duties of the partners vis-à-vis LLP. – Foreign Nationals can be a Partner in an LLP. – The liability of partners is limited to the extent of their contribution, except in case of intentional fraud or wrongful act of omission or commission by the partner. In essence LLP combines the advantages of both the Company and Partnership into a single form of organization. While one p

The Budget Glossary. On the way to the Budget which is expected to one of the biggest in Indian History, let us take a look at what some of the terms and jargons means. BALANCE SHEET - The lines and figures that reveal the receipts and expenditure of the year ANNUAL FINANCIAL STATEMENT This is the last word on the state’s receipts and expenditure for the financial year, presented to the Parliament by the government. Divided into three parts — Consolidated Fund, Contingency Fund and Public Account — it has a statement of receipts and expenditure of each. Expenditure from the Consolidated Fund and Contingency Fund requires the mandatory nod of the Parliament. CONSOLIDATED FUND - The government’s lifeline: it is a consortium of all revenues, money borrowed and receipts from loans it has given. All state expenditure is made from this fund. CONTINGENCY FUND - As the name suggests, any urgent or unforeseen expenditure is met from this Rs 500-crore fund, which is at the disposal of

CREDIT DERIVATIVES are over-the-counter contracts that allow credit risk to be exchanged across counterparties. A CREDIT DEFAULT SWAP (CDS) is a swap contract in which the buyer of the CDS pays premium (periodic or lump-sum) to the seller and, in exchange, receives a payoff if a credit instrument - typically a bond or loan - goes into default (fails to pay). This event of a default is called a “Credit event”. The payment made by the seller to the buyer is called a “Contingent payment” and is triggered by a credit event (CE) on the underlying credit. These contracts represent the purest form of credit derivatives (hence called Plain Vanilla), as they are not affected by fluctuations in market values as long as the credit event does not occur. Plain Vanilla CDS cater to the largest market share of the Credit Derivatives typically with 5 year maturities. Credit default swaps are often used to manage the credit risk (i.e. the risk of default) which arises from holding debt. Typically, t

The chapter 11 of the Bankruptcy Code provides (generally) for reorganization, usually involving a corporation or partnership. A chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals can also seek relief in chapter 11. Who files the petition A petition may be a voluntary petition, which is filed by the debtor, or it may be an involuntary petition, which is filed by creditors that meet certain requirements. The debtor also must file with the court: schedules of assets and liabilities; a schedule of current income and expenditures; a schedule of executory contracts and unexpired leases; and a statement of financial affairs Generally, a written disclosure statement and a plan of reorganization must be filed with the court. The disclosure statement is a document that must contain information concerning the assets, liabilities, and business affairs of the debtor sufficient to enable a cr

THE SPECIAL ECONOMIC ZONES ACT, 2005 ESTABLISHMENT OF SPECIAL ECONOMIC ZONE (Extracts from SEZ Act, 2005) Procedure for making proposal to establish Special Economic Zone. 3. (1) A Special Economic Zone may be established under this Act, either jointly or severally by the Central Government, State Government, or any person for manufacture of goods or rendering services or for both or as a Free Trade and Warehousing Zone. (2) Any person, who intends to set up a Special Economic Zone, may, after identifying the area, make a proposal to the State Government concerned for the purpose of setting up the Special Economic Zone. (3) Notwithstanding anything contained in sub-section (2), any person, who intends to set up a Special Economic Zone, may, after identifying the area, at his option, make a proposal directly to the Board for the purpose of setting up the Special Economic Zone: Provided that where such a proposal has been received directly from a person under sub-section, the Board may g

Transfer of Articles - IMPORTANT ANNOUNCEMENT The following decisions taken by the Council of the Institute are brought into force immediately for compliance by the Students / Members concerned. It is advised that required compliance be made by the concerned students / members. It may please be noted that non-compliance will be viewed seriously and proceeded against accordingly. The coaching classes shall not continue after 9.30 a. m. or start before 5.30 p.m. so as to enable the articled/audit assistants to concentrate wholly on practical training. Members of the Institute who are engaged in coaching be advised not to undertake coaching between 9.30 a.m. to 5.30 p.m. An articled assistant should undergo practical training in accordance with the guidelines of the Institute between 10:30 a.m. and 5:30 p.m. During the period an articled assistant shall not be permitted to attend colleges/other institutions for graduation or any other course. Every articled/audit assistant shall submit on

How-are IT returns selected for Scrutiny Procedure for selection of cases for 'Scrutiny' for non-corporate assessees In super cession of earlier instructions on the above subject the Board hereby lays down the following procedure for selection of returns / cases of *Non-Corporate Assessees* for scrutiny during the financial year i.e. 2007-08 . 2. The following categories of cases shall be compulsorily scrutinized; - i) All assessment pertaining to search and seizure cases. ii) All assessment pertaining to surveys conducted u/s 133A of the Income tax Act. iii) [1]All returns where deduction claimed under Chapter VIA of the Income tax Act is Rs.25 lakhs or above in stations other than the cities on computer network. iv) All returns, including those of non-residents, where refund claimed is Rs.5 lakhs or above in stations other than the cities on computer network. v) (a) All cases in which the CIT (Appeals) or ITAT has confirmed an addition / disallowance of Rs.5 lakhs or above o

The world's largest democracy in the world's biggest elections has given its mandate that it is the Congress which will be forming the next government in India. SINGH IS KING The Congress has led the UPA to win the 15th Lok Sabha elections yet again and Prime Minister Manmohan Singh has become the second prime minister after Jawaharlal Nehru to win the elections second time in a row. The results of the elections have been a pleasant surprise for the Congress and the UPA as hardly anyone would have expected the results to be so decisive with the BJP considered to a strong contenders this time. I need not highlight my personal views which are to the contrary and results have been as expected for me. The stability and strength of Sonia, political decency and image of Manmohan Singh and the youth appeal of Rahul has managed the Congress to bag more seats than expected. The just in time pre-poll strategy of Rahul Gandhi to field all political parties possible and an attempt t

4 things to look for in an investment New investors are often interested in purchasing a company's stock but are not sure where to begin. These four characteristics should serve as helpful guidelines in your search for a good investment. 1. What is the price of the entire company? When doing research, it is important that you look at more than just the current share price - you need to look at the price of the entire company. The "cost" of acquiring the entire corporation is called market capitalization (or market cap for short) and is frequently referred to by financial professionals. In short, the market cap is the price of all outstanding shares of common stock multiplied by the quoted price per share at any given moment in time. A business with one million shares outstanding and a stock price of $50 per share would have a market cap of $50 million. This market capitalization test can help keep you from overpaying for a stock. Consider the case of eBay and General Mo

Seven Questions to ask before Investing When putting together a portfolio of companies, there are seven basic questions that every investor should ask. The answers can help uncover competitive strengths and weaknesses, providing a better understanding of the economics and market position of the business. 1. What are the sources of the company’s cash flows? John Burr Williams taught us that the value of any asset is the net present value of its discounted cash flows. Before the investor can even begin to value a business, he has to know what is generating the cash. It is important to be specific and avoid making assumptions. Take Coca-Cola, for example. Billions of people across the world are familiar with Coke’s products. When you see it on the shelf of your local grocery store, you may have concluded that it was the Coca-Cola Company that sold the bottled goods to the grocer. In reality, a look at the most recent 10K reveals that, although the company does sell some finished bevera